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Kava Inc. manufactures industrial components.




Kava Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as K65. Data concerning this product are given below;Per Unit;Selling price -- $180;Direct Materials -- $29;Direct Labor -- $5;Variable Manufacturing Overhead -- $4;Fixed manufacturing overhead -- $21;Variable selling expense -- $2;Fixed selling and administrative expense -- $17;The above per unit data are based on annual production of 4,000 units of the components. Direct labor can be considered to be a variable cost. (Source: CMA, adapted);The company has received a special, on-time only order for 500 units of component K65. There would be no variable selling expense on this special order, and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company wouldn't be affected by the order. Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company shouldn't go?;a. $78;b. $38;c. $59;d. $180


Paper#33168 | Written in 18-Jul-2015

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